Salaried employees also worried about Patriot bankruptcy

CHARLESTON, W.Va. -- Thousands of United Mine Workers members and supporters came to Charleston last week to rally against a proposal by bankrupt Patriot Coal to cut workers' and retirees' health benefits. They say Patriot was designed to go bankrupt and that other companies transferred their benefit costs to Patriot to avoid paying for them.

But hourly workers represented by the UMW aren't the only ones worried about what happens to them under a Patriot bankruptcy.

South Charleston resident Jim Gillenwater worked as a salaried supervisor for Peabody Coal for 35 years, then another four years as a private contractor.

Today, Gillenwater is afraid he and his wife, Phyllis, will lose all the health-care and pension benefits Peabody promised him over the years.

"I would like to see us all get to Medicare age. I am there, but my wife is not. That is where it is hitting us," Gillenwater said.

"I am already 65, but she is 60. It will be five years for her to get on Medicare. And the cost of buying health insurance is crazy high today."

Gillenwater is one of more than 1,000 current and retired salaried employees whose benefits are now provided by Patriot Coal.

Patriot, which filed for Chapter 11 bankruptcy July 9, 2012, is negotiating with the UMW about reducing benefits the company provides to union members.

But Patriot is trying to completely cut all benefits to its salaried employees, including retired salaried employees who worked for Peabody or Arch, according to Jon Cohen, a lawyer from the Chicago law firm of Stahl Cowen Crowley Addis, who represents Patriot's salaried retirees.

"From the company's perspective, they might feel that because they can take away benefits from its salaried employees, maybe they should do it," Cohen said.

"But they are not legally obligated to the creditors of the company [listed in the bankruptcy filing] to do this," Cohen said. "Under the law, retirees can be protected if the company chooses to do so. A company can say, 'No, that is not how we treat our workers.'

"This is a company where the bean counters have decided -- 'Let's step on the people who built this company, because we can.' That says a lot about the decision-makers. It is a moral decision. It is not a legal obligation."

Patriot Coal was founded Oct. 31, 2007, when Peabody Coal sold all its union operations east of the Mississippi to the newly-formed company.

In 2008, Patriot bought Magnum Coal, a company that had taken over the union mines once operated by Arch Coal.

"When they formed this company, I believe it was formed to fail," Gillenwater said. "Patriot even took the contracts that Peabody didn't want, the bad contracts Peabody had made."

"If you were born in 1947 or earlier, and retired before Jan. 1, 2003, the company told us we would keep our health insurance," Gillenwater said. "A whole bunch of us quit so we could keep our insurance. Now they are cutting us off."

A hearing about salaried workers' benefits will take place April 23 in federal bankruptcy court in St. Louis, to determine if the company has the right to single-handedly end those benefits, Cohen said. If the company prevails, salaried retirees could lose their benefits within 60 days.

Janine Orf, Patriot's vice president for investor relations, did not comment specifically about the fears of her company's salaried retirees Friday.

Orf did release a short company statement: "All of our employees and retirees are being asked to make sacrifices to help Patriot emerge from bankruptcy. These sacrifices include reductions in compensation and benefits for salaried, union and nonunion employees.

"The modifications we are seeking in this motion are expected to save Patriot $26.9 million in total cash costs over the next five years."

Patriot Coal's website states: "The coal industry is experiencing one of the sharpest and deepest market adjustments of the last 30 years. As a result, every participant in the industry must make rapid and extraordinary changes in response to declining demand and margins.

"Patriot is using the Chapter 11 reorganization process to make the necessary changes to become competitive and to emerge as a long-term industry participant. The stakes are very high. More than 4,000 jobs will be lost if we cannot successfully reorganize."

"The union is putting on a good show," Gillenwater said. "They put on a good rally. They also have a contract that will bind the companies. They will maintain some reasonable form of insurance and retirement benefits. But it looks like we will end up with absolutely nothing."

The Chapter 11 bankruptcy filings list 99 coal and land companies, owned or controlled by Patriot, as other "debtor entities."

When the spin-off took place back in 2007, Peabody transferred several active mines to Patriot.

"They also took retiree obligations off the books for people who had already been retired -- people who worked for Peabody for 20, 30 or 40 years," Cohen said. "They transferred those liabilities over to Patriot.

"Patriot is not only seeking to terminate retiree benefits, but says their termination should not result in a legal claim. You're talking about retirees living on fixed incomes.

"A majority of them worked underground for their entire careers, side-by-side with union members, suffering the same kind of industrial long-term health effects you see with any coal miners.

"They are really being picked on by the company," Cohen said.

In an earlier statement released Tuesday, Orf stated, "Patriot has filed a lawsuit against Peabody Energy to prevent them from using the Patriot bankruptcy to reduce their own obligations to retirees whose health care they agreed to pay in the spin-off."Reach Paul J. Nyden at pjnyden@wvgazette.com or 304-348-5164.